Integrated Systems Growing but Not So in Managed Care

By Fleming, Harris Jr | Drug Topics, June 1, 1998 | Go to article overview
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Integrated Systems Growing but Not So in Managed Care

Fleming, Harris Jr, Drug Topics

While the number of highly integrated health-care systems continues to increase, managed care may be losing ground as components of those systems. For the pharmacy owner or manager looking for more business from a health maintenance organization, that may not be such a bad thing, however. Nonsystem HMOs tend to put a larger share of their operating bucks in pharmacy than system HMOs. Or so concludes Integrated Health Systems Digest, part of the Hoechst Marion Roussel Managed Care Digest Series 1998.

The digest defines highly integrated systems as those that own or contract with three or more components of care delivery-including at least one hospital, one physician component, and at least one other component-and have at least one systemwide contract with a payer. It examined the 228 most highly integrated health systems and analyzed how hospitals, physicians, managed care organizations, and other providers operate within those systems.

The digest reported that in 1997, about 54% of highly integrated systems included a managed care component, down from nearly 60% in 1996. Of the 749 licensed HMOs as of Jan. 1, 1997, 94 (13%) were tied to highly integrated systems. These plans enrolled 22% of all HMO members.

Pharmacy expenditures in 1996 (the last year for which this information was complete) accounted for 10% of total operating expenses at HMOs that were part of highly integrated systems, up slightly from 9% in 1995. Comparatively, pharmacy expenditures made up 14% of all operating costs at nonsystem HMOs in 1996, up sharply from 9% in 1995. Overall, pharmacy spending was responsible for 14% of total operating costs for HMOs in 1996.

System HMOs cut pharmacy expenditures per member per year in 1996, though not as sharply as nonsystem plans. Pharmacy spending per member, per year by system HMOs fell 10%, to $125.93 from $139.44. Nonsystem HMOs trimmed pharmacy expenditures 25%, to $125.40 per member per year, from $166.26 in 1995.

One reason for the cuts among system HMOs is the fact that the health plans have exerted progressively more control over drug selection. The use of closed formularies showed a steady increase over the past three years tracked for this installment of the digest series. Approximately 35% of HMOs tied to integrated systems in 1996 employed a closed formulary, up from 33% in 1995 and 29% in 1994. Just 25% of nonsystem HMO used closed formularies, though that percentage also increased, up from 20% in 1995.

The percentage of system HMOs that had no formularies continued to fall in 1996, to 14% from 17% in 1995 and 21% in 1994.

That trend does not necessarily mean patients and physicians have fewer drug choices, however. Many "closed" formularies are more open than they used to be, according to Steve Lubiak, v.

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Integrated Systems Growing but Not So in Managed Care


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